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There’s a direct and immediate opportunity for brokers to diversify into the growth market of short-term finance.
To make your life much easier from the outset, ask borrowers these five questions:
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1. How old are you?
Age is just a number, right? Wrong. If your clients are (un)fortunate enough to be classified as octogenarians, then the only application forms they ought to be completing are the ones headed with ‘P&O Cruises’. We cannot conceive any reason why a borrower of this vintage would have a requirement for short-term funding.
2. What is the loan amount?
Basic? Yes. Forgotten? More often than you would think. Many a time, the answer we receive to these questions is “As much as I can get”. This is not a loan amount. In most cases, business borrowers have a specific loan purpose (purchasing stock/inventory, upgrading systems, discharging existing liabilities) and should have a specific figure in mind to match. It is essential to quantify borrowers’ funding requirements. To that end, it is valuable to know whether the client requires the given amount – net or gross. This becomes an important question when considering borrowers’ funding requirements, as most short-term lenders pre-pay interest and capitalise fees and charges.
3. What is the purpose of the loan and the proposed method of repayment?
If the answer to these questions is less than three words, it’s not an answer. While we are not asking for a wafted dissertation on how you wish to apply loan proceeds, we do require a considered yet concise response to a fairly basic question. The same holds true for the applicants’ method of repayments.
4. What is the value of the security property?
The customer is always right? Wrong. That’s retail, not finance. This is most likely their most valuable asset. The notion of objectivity went out the door the minute they signed the contract for sale. Most Australian home owners have been charmed by the notion that property values in Australia always go up. For the most part, this is true (assuming that it’s a metropolitan location). However, it is not a case of perfect linear progression – five per cent capital growth year in, year out, is a utopia that simply doesn’t exist. CoreLogic RP Data is an inexpensive and invaluable tool for all brokers, which will allow you to objectively assess the value of your client’s property. It will even provide comparable sales in the area.
5. What is the first mortgage priority limit?
If I could conjure up a stronger word than ‘paramount’, I would use it. This question is of paramount importance, as this information is not reflected in basic loan statements. Loan statements do not always recite availability of redraw, additional business loans, lines of credit or overdrafts that may be cross-collateralised over the property. This information can only be provided by the first mortgagee.
Trent Littleford, operations director, Interim Finance
As the operations director of established short-term lender Interim Finance, Trent oversees the financing/ loan processing division nationwide. The company is known for its best-in-market rates, customised lending solutions and seamless back-end support that ensures compliancy. As a professional lender with over 20 years in the sector, the company prides itself on its transparency, solution-focused and relationship-driven approach.
